Trends

 

09 02 2015

09 02 2015

The Equipment Leasing Industry Continues To Strengthen

One of the main indicators of the stability and confidence level in the leasing equipment industry delivered extremely positive news recently. Both the Equipment Leasing and Finance Association’s Monthly Leasing Finance Index and the Equipment Leasing and Finance Foundation’s Monthly Confidence Index indicated a strengthening industry poised to reap the benefits of continued economic growth throughout the country moving into the third quarter of the year.

According to the ELFA’s July 2015 MLFI, overall new business volume for the companies that form a cross section of the industry reached $8.2 billion for the month. While this does represent a 14 percent drop from June’s $9.5 billion in volume, the cumulative volume total is still up 8 percent over 2014’s numbers. In addition, the $8.2 billion marked a 4 percent increase in new business volume from 2014.

“The consensus forecast for the second half of 2015 is for the U.S. to show modest, if not robust, economic growth,” said ELFA President and CEO William G. Sutton. “July MLFI-25 data provide evidence of this narrative, in terms of origination, credit quality and headcount. Despite economic headwinds in parts of Europe and China, as well as constant chatter about a looming interest rate hike by the Fed, U.S. businesses in many sectors are investing steadily in productive assets, in the process relying on financing solutions for these equipment acquisitions.”

Confidence levels

Meanwhile, the ELFF’s August MCI-EFI reported the confidence level in the equipment finance market experienced a sharp increase in the past month. According to the index, August’s confidence level reached 67.4, a significant boost over July’s reading of 62.6.

Among the categories that garnered the largest gains, when asked whether business conditions for the next four months will improve, 36.4 percent of respondents believed it would, an increase of 19.2 points from July’s reading. Furthermore, not a single one of the respondents believe business conditions will worsen over the next four months, representing a decline of 6.9 percent month over month.

According to the confidence index, 40.9 percent of respondents anticipate growth over the next four months for leases and loans to fund business capital expenditures, otherwise known as capex. In July, only 20.7 percent of respondents thought capex would increase, which further illustrates the confidence levels in this industry are clearly trending upward. Much like the respondents’ answer to whether business conditions would decline in the coming months, the surveyed executives also did not believe demand for leases and loans to fund capex would decline.

Respondents who anticipate greater access to capital to fund equipment acquisitions jumped from 20.7 percent in July to 31.8 percent in August. Once again, none of the respondents believed companies would experience less access to capital in the coming months.

Perhaps the strongest indicator of how surveyed executives feel about the current state of the economy and business conditions can be found in the index’s section about how U.S. economic conditions will fare over the next six months. While only 24.1 percent of respondents on the July survey said conditions would improve, 27.3 percent did not believe these conditions will continue to improve.

In addition, from a general economic standpoint, a whopping 95.5 percent of the executive leadership believe the current U.S. economy is fair, while not a single respondent thought it was in poor shape.

Equipment financing is a great way for small business owners to take advantage of utilizing top-of-the-line machinery for their companies, while saving money on overhead expenses and helping the business prosper during challenging economic times. As this industry continues to grow in terms of confidence and overall volume, now is the perfect time for small businesses to take advantage of these economic headwinds.

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